Buying Native-American Cigarettes, New Yorkers Avoid Hefty Tax

January 29, 2004

The highest tobacco taxes in the country are sending New York smokers to tax-free Native American retailers for their cigarettes, prompting government officials to consider implementing a tax on cigarettes purchased from Native American stores.

Off-reservation retailers, who generally oppose tobacco taxation, claim they are tired of shouldering the burden of New York's massive 1999 excise tax hike, which doubled the tax on a carton of cigarettes from $5.60 to $11.10, resulting in revenue losses as customers looked elsewhere for cigarettes. According to the FACT Alliance (Fair Application of Cigarette Taxes):

From 2001 to 2002, New York lost an estimated $1.5 billion in revenue from non-taxed purchases of Indian cigarettes by consumers.

The state hopes to compensate for its $11.5 billion budget deficit with additional cigarette taxes, including a tax of 39 percent per carton on wholesalers who sell to reservation retailers.

However, American Indian groups claim that such taxes on their cigarettes would violate their sovereignty, create the loss of jobs in their communities and infringe on their right to operate without government interference.

Leaders of the 7,200-person Seneca Nation tribe are considering creating a wholesale tobacco business in order to avoid the tax and keep their prices low, rather than lose an estimated 1,000 jobs on their three reservations.